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UCS GROUP LIMITED - INTERIM RESULTS FOR THE PERIOD ENDED 31 MARCH 2004
UCS Group Limited
Interim results for the period ended 31 March 2004
UCS Group Limited
Incorporated in the Republic of South Africa
Reg No: 1993/002253/06
ISIN: ZAE000016150
Share Code: UCS
94% growth in cashflow from operating activities
75% growth in annuity revenue
43% growth in headline earnings per share
Income statement for the
period ended 31 March 2004
Reviewed Restated Percen- Restated
6 months 6 months tage 12 months
31/03/ 31/03/ change 30/09/
2004 2003 2003
R"000 R"000 R"000
Revenue 245855 140372 75.2 306218
Profit from operations 46515 30411 53 63481
before interest,
depreciation and research
and development
Research and development -12887 -12055 6.9 -24239
expenditure
Depreciation and -18902 -8895 112.5 -20461
amortisation
Profit before interest and 14726 9461 55.7 18781
investment income
Net interest and 790 2967 -73.4 5126
investment income
Dividend and investment 4350 5262 8700
income
Interest received 2713 2825 929
Interest paid -6273 -5120 -4503
Profit before taxation 15516 12428 24.9 23907
Taxation -1445 -1973 -26.8 -4380
Profit after taxation 14071 10455 34.6 19527
Minority share of subsidiary -157 -30 423.3 -294
earnings
Net profit for the period 13914 10425 33.5 19233
Earnings per share (cents) 5.9 4.5 31.1 8.6
Adjusted for:
Amortisation of goodwill 0.8 0.2 300 0.6
Deficit on defined 0 0 0 0.6
benefit fund
Headline EPS - (cents) 6.7 4.7 42.6 9.8
Fully diluted earnings 5.1 4 27.5 7.3
per share (cents)
Fully diluted headline 5.8 4.2 38.1 8.3
earnings per share (cents)
Dividend per share (cents) 2 1.8 11.1 3.8
Net asset value per share 80.7 81.1 -0.5 77.5
(cents)
Ordinary shares in issue 237497 211205 12.5 221973
(`000)
(excl shares held in treasury)
Weighted average of ordinary 237497 233733 1.6 223366
shares in issue (`000)
Balance sheet
at 31 March 2004
Reviewed Restated Restated
6 months 6 months 12 months
31/03/2004 31/03/2003 30/09/2003
R"000 R"000 R"000
ASSETS
Non current assets 169929 97136 163860
Property, plant and equipment 47220 20619 53570
Goodwill and trademarks 102172 58082 90305
Investments and loans 6186 8731 7784
Deferred taxation 14351 9704 12201
Current assets 128770 132263 148561
Inventories 6780 5593 5325
Receivables 59331 71344 66257
Cash 62659 52746 73908
Taxation 0 2580 3071
Total assets 298699 229399 312421
EQUITY AND LIABILITIES
Capital and reserves
Shareholders" interests 191764 171241 171944
Non current liabilities 30631 19894 34266
Minority shareholders in 2894 2414 2677
subsidiaries
Long and medium term loans 1467 17480 1475
Revenue in advance 26270 0 30114
Current liabilities 76304 38264 106211
Payables 62283 34301 69529
Revenue in advance 12300 0 10191
Current portion of long term 1475 0 24237
loans
Taxation 246 3963 2254
Total equity and liabilities 298699 229399 312421
Cashflow statement
for the period
ended 31 March 2004
Reviewed Restated Per-cen- Restated
6 months 6 months tage 12 months
31/03/2004 31/03/2003 chan-ge 30/09/2003
R"000 R"000 R"000
Cash flow from operating 27475 14171 93.9 40088
activities
Cash generated from 33628 18356 83.2 41479
operations
Working capital changes 339 100 9869
Cash generated from 33967 18456 51348
operating activities
Investment income 790 2967 5126
net finance cost
Taxation -2532 -3057 -7967
Dividend paid -4750 -4195 -8419
Cash applied to -22821 -5670 302.5 11851
investing activities
Cash applied to -15903 -18855 -15.7 -41131
financing activities
Cash and cash equivalents
- Net change -11249 -10354 8.6 10808
- At beginning of period 73908 63100 17.1 63100
- At end of period 62659 52746 18.8 73908
Segmental information
for the period
ended 31 March 2004
Business segments
Reviewed Restated Percen- Restated
6 months 6 months tage 12 months
31/03/2004 31/03/2003 change 30/09/2003
R"000 R"000 R"000
Revenue 245855 140372 75.1 306218
Software 118496 106535 11.2 224928
Solutions 127359 33837 276.4 81290
Profit from operations 46515 30411 53 63481
before interest, depre-
ciation and research
and development
Software 25822 22958 12.5 51975
Solutions 24037 8361 187.5 19547
Corporate & eliminations -3344 -908 268.3 -8041
Statement of changes
in equity for the period
ended 31 March 2004
Share Prefe- Share Distri- Total
capi- rence premium butable
tal share reser-
capital ves
R"000 R"000 R"000 R"000 R"000
Balance at 30 Sept 2003 1110 0 50256 120573 171939
as previously reported
Prior year adjustment for 5 5
staff share trust
consolidation
Balance at 30 Sept 2003 1110 0 50256 120578 171944
restated
Shares issued 78 43 10535 10656
Attributable earnings 13914 13914
for the period
Cash dividend paid -4750 -4750
Balance at 31 March 2004 1188 43 60791 129742 191764
Comments
The UCS Group completed a successful six-
month period during which operational
performance exceeded budget and solid
progress was recorded in meeting strategic
objectives.
The Group has continued to increase its
footprint in its chosen markets and the
extremely harsh trading conditions for ITC
companies of the past few reporting periods
are showing signs of improvement. The
period under review was also the first full
six months of trading since the acquisition
of the Affinity Logic business (renamed UCS
Solutions Proprietary)Limited as from 1
April 2004), which performed well. However,
the full synergistic benefits of this
strategic acquisition are only expected to
be achieved over the next two to three
years.
Turnover grew strongly by 75% to R246-m
(2003 - R140-m). 54% growth was due to
acquisitions and the balance of 21% through
organic growth. Annuity revenues grew by
75% to R142-m (2003 - R81-m), representing
58% of total revenues (2003 - 58%).
Growth in R & D expenditure was limited to
7% as the Group made no further software
acquisitions and began to benefit from
synergies through the merging of four
previously separate retail software
businesses into a single operating entity.
Again, the full benefits of consolidation
in the retail software businesses are only
expected to be realised in the medium to
long term. R & D costs continue to be fully
expensed as incurred.
EBITDA growth of 83% to R33.6-m (2003 -
R18.4-m) was partially offset by a 113%
growth in depreciation and amortisation to
R18.9-m (2003 - R8.9-m) largely as a result
of the Affinity Logic acquisition. The
Affinity Logic business model has been
adjusted to substantially reduce future
requirements for large-scale replacement of
fixed assets.
Net interest and investment income has
decreased (2004 - R0.8-m, 2003 - R3-m) as
the Group utilised mainly cash resources
for the Affinity Logic acquisition and
interest rates achieved on the reduced cash
balances were significantly lower than for
the same period last year. Material
interest-bearing debt within Affinity Logic
was repaid on 31 March 2004 but attracted
an interest expense during the period under
review.
These factors contributed to the overall
increase of 25% in profit before tax to
R15.5-m (2003 - R12.4-m).
Net profit for the period came in 34%
higher at R13.9-m (2003 - R10.4-m) and
earnings per share grew by 31% to 5.9c
(2003 - 4.5c). Headline earnings per share
increased by 43% to 6.7c (2003 - 4.7c).
Cash generated from operating activities
improved by 94% to R27.5-m (2003 -R14.2-m).
The Group"s commitment to the sale of its
own technology and services remains strong.
Although sales of third-party products and
services grew by 47% to R43.4-m (2003 -
R30.2-m), this only accounted for 18% of
total revenues (2003 - 22%). Margins from
third-party sales accounted for less than
7% (2003 - 10.3%) of total Group margin.
Headcount at the end of March 2004 was 1006
(March 2003 - 741), a growth of 36%.
Contingent liability
In the results announcement and the annual
report for the financial year ended 30
September 2003 it was disclosed that there
was a potential contingent liability of R
15-million in respect of tax that was
reassessed for the Affinity Logic 1999,
2000 and 2001 financial years. Affinity
Logic submitted an objection in respect of
these reassessments in November 2003 and in
January 2004 the company was notified by
SARS that the objections had been rejected.
Documentation has been submitted to
progress this issue to an alternate dispute
resolution (ADR) process.
The Group will continue to disclose this as
a contingent liability until the ADR has
been concluded. This amount does not
include potential interest that could be
levied if the ADR process is unsuccessful.
Staff Share Trust
The Group has consolidated the UCS Group
Limited Staff Share Trust for the first
time in the period under review and a
retrospective adjustment has been made to
bring the prior year comparatives into
line.
Prospects
As stated in our annual report, the Group
has a healthy order book and continues to
grow its market share in its chosen
business sectors. Prospects for the second
half of the year remain promising although
not without challenges.
The Group"s focus on the generation of
sustainable annuity revenue streams means
that overhead structures grow in advance of
new business billings and any delays on
installations can have a short-term
negative impact on margins. In addition,
the synergistic benefits of the various
restructuring programmes currently under
way are only expected to flow through to
the bottom line over the next two to three
years. Given these factors, management is
cautiously optimistic that the group should
achieve satisfactory growth in the headline
EPS for the full year.
Dividend declaration
Notice is hereby given that the board of
directors has declared an interim dividend
of 2.3 cents per ordinary share in respect
of the 6 months ended 31 March 2004. The
dividend will be paid on Monday 7 June
2004.
To comply with the procedures of STRATE,
the last day to trade in the shares for the
purpose of entitlement to the interim
dividend is Friday 28 May 2004. The shares
will commence trading ex dividend on Monday
31 May 2004 and the record date will be
Friday 4 June 2004.
Share certificates may not be
dematerialised or rematerialised between
Monday 31 May 2004 and Friday 4 June 2004,
both days inclusive.
Accounting policies
The interim results for the period ended 31
March 2004 have been reviewed by the
auditors, Kaplan and Kaplan, and have been
prepared on a basis consistent with the
prior year annual financial statement
accounting policies, with the exception of
the consolidation of the UCS Group Limited
Staff Share Trust, and in compliance with
South African Statements of Generally
Accepted Accounting Practice. The review
opinion is available for inspection at the
company"s offices.
In line with the recommendations by the JSE
Securities Exchange South Africa to
consolidate the employee share incentive
scheme, the current year net profit
increased by R0.1-m as a result of an
increase in net interest received. The
prior year comparative period has been
restated with a net decrease in headline
earnings of R0.6-m which consists of a net
increase in interest paid. The net decrease
to headline earnings for the year ended 30
September 2003 was R1.2-m due to the
cancellation of interest on the loan
accounts to the beneficiaries of the trust.
The actual and weighted average number of
shares in issue for the comparative periods
remained unchanged after consolidation of
the trust. As a result of these amendments,
the headline earnings per share have been
restated for the six months ended 31 March
2003 from 4.9 cents to 4.7 cents and for
the year ended 30 September 2003 from 10.3
cents to 9.8 cents.
For and on behalf of the board
Adv RG Goodman SC (Chairman)*
JD Bright (Chief Executive Officer)
Board of directors
Richard Goodman SC (Chairman)*, John Bright
(Chief Executive Officer), Joseph Claasen*,
Duncan Coles, Rebecca Eliot*+, Patrick
Fitzgerald, Bryan Hattingh*, E.B. (Bert)
Levenstein*, Neil Michelson (Chief
Operating Officer), Dean Sparrow (Chief
Financial Officer), Peter Terblanche*.
* Non-executive + British
Company secretary
Verity Mary-Ann Broadrick
UCS Group Limited
Incorporated in the Republic of South
Africa
Reg No: 1993/002253/06
ISIN: ZAE000016150
Share Code: UCS
Registered office
20th Floor
209 Smit Street
Braamfontein 2001
PO Box 31266
Braamfontein 2017
Transfer secretaries
Ultra Registrars (Pty) Limited
11 Diagonal Street
Johannesburg 2001
PO Box 4844
Johannesburg 2000
Date: 05/05/2004 04:56:13 PM Produced by the JSE SENS Department
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